Warehouse Management Software (WMS) vs. ERP Software

I spend a considerable portion of my day chatting with business managers from various walks of life, who run many types of businesses. One thing that I have learned from experience is that different people use business and software terminology differently. Two businesses that are virtually identical, for example, may consider themselves in completely separate industries (such as “manufacturers” who really operate as distributors). Today we’ll examine the difference between Warehouse Management Software (WMS) and Enterprise Resource Planning (ERP) Software.

Warehouse Management Software is defined as “a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, putaway and picking. The systems also direct and optimize stock putaway based on real-time information about the status of bin utilization”[1]. WMS typically lacks accounting, contact management and other functionality associated with an ERP system – thus WMS typically integrates with an ERP system.

Warehouse Management Software (WMS)

Enterprise Resource Planning (ERP) Software

Picking, packing, receiving, shipping

Bar code scanning

Inventory location recommendations

Warehouse layout planning

Radio-frequency identification for monitoring product flow

Price: As high as $100,000 or more

Picking, packing, receiving, shipping

Bar code scanning

Inventory location tracking

Accounting (AR, AP, GL)

Order Entry & Invoicing

Purchase Orders

Contact management

Inventory management

Price: from tens of thousands

What begins to become confusing is that many ERP systems also contain various levels of inventory management and some warehouse management features. For example, an ERP system may be able to track inventory locations but a distinction may be in the ERP software’s ability to make warehouse layout recommendations. If your business requires inventory management along with accounting, order entry and contact management, chances are you are looking for ERP software. If, instead, you require warehouse layout planning or in-depth product tracking with RFIDs you require warehouse management software. Many ERP systems can accommodate WMS features such as bar code scanning and warehouse shipping.

One thing to be wary of is the added cost of WMS. Warehouse management software can be several times more expensive than ERP software and is usually only required for larger businesses with substantial warehouses. A proper ERP system should be able to accommodate most inventory requirements including basic warehouse management at a far more affordable price. The “Amazons” and “eBays” of the world most certainly require WMS, however, many small and medium businesses will find that a modern ERP system provides all the functionality they require.